In Their Own Words: StepStone Group’s Jay Rose

With the New Year upon us, Private Equity Beat reached out to various members of the private equity community to hear their thoughts on the year that passed and the challenges that lie ahead. Today, we caught up with Jay Rose, partner at StepStone Group.

What surprised you the most about 2013?

What surprised me the most about 2013 was the exceptionally strong performance of the public equity markets. I don’t think most investors expected the Standard & Poor’s 500 to increase almost 30% on the heels of a strong 2012, when the index was up 16%.

What do you think will be the biggest challenge the private equity industry will face in 2014?

Although central bank policies have proven to be useful, I think the biggest challenge for all asset classes, including private equity, is the continued anticipation and potential repercussions of such policies – specifically, the easy money policies and liquidity central banks have extended to the financial system will eventually need to be reversed. As such, the risk of a downturn in global asset prices has increased due to expected changes to monetary policies in 2014. The mere mention of such a reversal in June and August of last year caused volatility in the markets and triggered a “flight to quality” and “flight to liquidity” across global asset portfolios. I perceive these recent market events as a harbinger of challenges to come.

What expectations do you have for the fundraising market in 2014?

I believe fundraising has normalized over the last few years and will continue to do so in 2014. Since 2010, global fundraising activity has been approximately $250 billion per year. This is down significantly from the peak years of 2007 and 2008, when annual capital raised was over $400 billion. Similar to 2013, I expect to see a bifurcation of the “haves and have nots,” with the former raising funds in short intervals and the latter seeking extensions.